The central government seems to be keeping a close eye on cash transactions after demonetization. As part of this, the income tax Department keeps an eye on all large cash transactions. Recently, a similar incident happened to Wasim, who runs a hotel business. As he is in the hotel business, he was accumulating cash every day and he was depositing it in his bank account. The notice came through the income tax department asking for the cash deposited in the bank account .
It was the first time he had received such a notice. In that confused state of mind, he was asking me, who reported this to the income tax? I told him that your bank must have reported the same to the Income Tax Department, on which he got angry with the bank. I then explained him , the bank had done this in accordance with the law and if transactions made with the bank, mutual fund collectors, or brokers or deputy registrars are above a certain limit, they are obliged to report the details to the Income Tax Department.
Let’s take a look , which cash transactions are reported to Income Tax Department through these agencies.
1) Making a Fixed deposit through Cash: If a person has made fixed deposit more than Rs 10 lakh in cash in a financial year, the bank is required to report the details to the Income Tax Department. You may receive a notice from the Income Tax Department inquiring about the cash deposited by such transactions. Therefore, it is necessary to keep proper documents along with source details of the cash deposited.
2) Cash Deposit in a Bank Account: If more than 10 lakh cash is deposited in any bank account or co-operative bank other than the current bank account of the individual then said bank has to report these transactions to the Income Tax Department about the said transactions. Therefore, in this type of transaction, it is necessary to keep the detailed documents as to where from he got this cash.
3) Credit Card Bill Payment in Cash: If you have paid your credit card bill in cash of Rs. 1 lakh or more in a financial year or the total credit card arrears settlement is of Rs.10 Lakh rupees or more then the said details is sent to the Income Tax Department. In such transactions, it is necessary to keep proper documents of the cash to be paid against the credit card bills.
4) Real Estate Transactions: If you are buying any type of real estate (land or house etc.) and the financial limit of this transaction is Rs. 30 lakhs and above, the details of such transactions are reported to the Income Tax Department through the Property Registrar’s Office. In this type of transaction, you need to keep a record of the money received or paid so as to show the same in the income tax return.
5) Share, Mutual Fund and Bond Purchases: If you are investing Rs 10 lakh or more in shares, mutual funds and bonds in a financial year, the details of the transaction are reported to the Income Tax Department.
6) Foreign currency Purchasing Transactions: If you make a purchase of Rs 10 lakh or more in foreign currency in a financial year, the details of such transaction are reported to the Income Tax Department.
